US STOCKS-Futures edge higher as 'cliff' talks continue

Dec 30 (Reuters) - Equity futures were slightly higher on
Sunday night as talks continued in Washington over resolving the
"fiscal cliff."

While the Senate will not vote Sunday night on any bill to
avoid a series of $600 billion in tax hikes and spending cuts,
as many had hoped, negotiations continued between lawmakers and
the White House.

The Senate will reconvene on Monday after the open of equity
trading. In order for a deal to take effect, it would also have
to be passed by the House of Representatives.

Despite the gain indicated by futures, stocks still could
end up falling on Monday when the cash markets open if lawmakers
are unable to come to an agreement to avoid the cliff, which
many fear could push the economy into recession.

" There is always a chance for a massive stalemate, and we
could see a lot more volatility if we get to a point where
there's no more hope. Right now there's still hope," said Adam
Sarhan, chief executive of Sarhan Capital in New York.

Midnight on Monday marks the deadline for a deal, though the
government can pass legislation in 2013 that retroactively
prevents going over the cliff, an option that is viewed as
politically easier.

"At some point, someone will have to blink, or Congress will
just come in early in 2013 and vote for a tax cut," Sarhan said.
"Something will be done to resolve this."

S&P 500 futures were up 5.6 points, or 0.4 percent,
at 1,389.40 in electronic trading. Dow and Nasdaq
futures were also slightly higher.

Stocks fell sharply on Friday, with significant losses in
the last minutes of trading, as prospects for a deal worsened at
the beginning of the weekend.

The rise in the futures market does not necessarily augur
for a rally on Monday, however. The cash market and futures
markets closed with a wide gulf on Friday, by virtue of the
extra 15 minutes of trading in futures.

The S&P 500 closed at 1,402.43 at 4 p.m. ET on Friday, down
1.1 percent, but futures continued to fall before closing 15
minutes later with a loss of 1.9 percent. S&P futures and the
S&P cash index don't match point-by-point, but that kind of
disparity points to a weak opening in stocks on Monday.

One hour before they had hoped to present a plan on Sunday,
Democratic and Republican Senate leaders said they were still
unable to reach a compromise.

Earlier in the day, President Barack Obama, appearing on
NBC's "Meet the Press," said investors could begin to show
greater concerns in the new year.

"If people start seeing that on January 1st this problem
still hasn't been solved... then obviously that's going to have
an adverse reaction in the markets," he said,

Investors have remained relatively sanguine about the
process, believing that it will eventually be solved. In the
past two months markets have not shown the kind of volatility
that was present during the fight to raise the debt ceiling in
2011.

The Dow industrials and the S&P 500 each lost 1.9 percent
last week, after stocks fell for five straight sessions, which
marked the S&P 500's longest losing streak in three months.
Equities have largely performed well in the last two months
despite constant chatter about the fiscal cliff, but the last
few days shows a bit of increased worry.

The CBOE Volatility Index rose to its highest level
since June on Friday, closing at 22.72.